Progress Software Corp. (PRGS) shares fell the most in more than 16 years after Chief Executive Officer Jay Bhatt announced plans to step down and the company withdrew its revenue forecast, saying sales may slip during the transition.
Progress tumbled 14 percent to $18.52 at the close in New York, the biggest decline since March 1996. Before the drop, the shares had been up 11 percent this year.
Bhatt, who also served as president and a director, is leaving to become CEO of a closely held company, Progress said today in a statement. The company said it wouldn’t reaffirm its quarterly sales forecast in light of the CEO transition because Progress “may experience some slippage in revenue growth.”
Bhatt’s departure could mean the board is looking to sell the company, Mark Schappel, a Benchmark Co. analyst, said in a note to investors. Bhatt was against selling the company, which is why he proposed an aggressive plan to refocus it, said Schappel, who advises buying the shares.
Tom Barth, a spokesman for Bedford, Massachusetts-based Progress, declined to comment on whether the business is being sold or what company Bhatt is joining.
“My decision to leave Progress to pursue another opportunity as the CEO of a privately held corporation in another segment of the software industry represents the fulfillment of a lifelong passion of mine and has nothing to do with my strong belief in the company’s ability to continue accomplishing its strategic priorities,” Bhatt said in the statement.
Progress, which helps businesses manage software applications on-site or remotely, has hired an executive-search firm to replace Bhatt, who will leave after Dec. 7. It will be difficult to recruit someone qualified, said Gabe Lowy, an analyst with Mizuho Securities in New York.
“You would have to persuade the new CEO to implement someone else’s strategy, who left six months into it,” Lowy said in an interview. “He does leave the company in a bit of a bind.”
In September, Progress had forecast that sales would range between a decline of 2 percent to a gain of 1 percent in the fiscal fourth quarter, which ends in November. Lowy said the board may have used Bhatt’s departure as an excuse to withdraw guidance.
Progress said it remains committed to a plan to return at least $350 million to shareholders, potentially by the end of 2013. Still, it won’t be completing an anticipated $150 million in stock buybacks by the end of fiscal 2012.
Chairman Phil Pead will become Progress’s executive chairman, the company said.
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